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Don't try to lump a fixed income stream in with bonds they are completely different. This is because if you hold them to maturity then fixed income bonds are not really fixed. The rate of return will change as the principle is reinvested. For example if you buy a five-year bond now then in 2009 it will mature and be reinvested at whatever the (probably higher) future interest rate is.

I am not a fan of market timing but with the current low interest rates I would underweight bonds.

Instead of trying to use some rule of thumb in trying to allocate your investments you might try thinking of your funds as three separate pools of money.

1) Late retirement, age 81 to 95+
2) Middle retirement, age 71 to 80.
3) Early retirement, age now to 70.

Figure out how much you will need for each pool then invest with that timeline in mind. For example if you are 60 then you will have a 20 to 35(or more) year investment horizon for your “late retirement” pool so relatively little of this pool would be in bonds. When you have calculated the three sets of allocations add up the totals to see if they make sense.


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